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9 74. OVERVIEW OF INDIA’S CONSUMER DURABLES MARKET India’s Consumer Market India’s consumer market is riding the crest of the country’s economic boom. These classes exist in urban as well as rural households both.1 15.50i Rupees. These groups are: Lower Income.5 54.1 The Destitute (below Rs. There are five classes of consumer households.3 12.1 71.16-22. 22-45. for equivalent needs and services. the rupee income classifications by themselves do not present a realistic picture of market potential for a foreign business enterprise. As a result. Structure of the Indian Consumer Market (in millions of households) Consumer Classes (Annual income Rs) 1996 2001 The rich (Rs.32.000) The Climbers (Rs.8 199. and Higher Income. For instance. on purchase power parity terms. Driven by a young population with access to disposable incomes and easy finance options. Consumer Classes Even discounting the purchase power parity factor.2 2 The Consuming Class (Rs. while the exchange rate of one US dollar is 48. has released an alternative classification system based on consumption indicators.000) 33. three subgroups of Middle Income. the domestic purchasing power of a US dollar in the US is closer to the purchasing power of Rs 6 in India.Corporate Catalyst India A report on Indian Consumer Durables Industry 1. and consumption trends may differ significantly between similar income households in urban and rural areas. the Indian rupee has a very high purchase power parity compared to its international exchange value. based on annual household income (based on year 1995-96 indices).6 The Aspirants (Rs. India’s premier economic research institution.4 Total 164.7 Source: National Council for Applied Economic Research (NCAER) 2007 6.6 215. 000 and more)ii 1. despite being having low per capita national income (US$ 340 per capita). income classifications do not serve as an effective indicator of ownership and consumption trends in the economy.2 Change 416% 179% 37% -65% -61% 21% . India ranks fifth in the world.215. 16. which is more relevant for ascertaining consumption patterns of various classes of goods. because of significant differences in purchase power parities of various currencies. India officially classifies its population in five groups. 000) 54. the consumer market has been throwing up staggering figures. which differ considerably in their consumption behavior and ownership patterns across various categories of goods. However. 45. In fact. the National Council for Applied Economic Research (NCAER).8 180. ranging from the destitute to the highly affluent.2 90.2 3. 000) 44 28. Accordingly.
Corporate Catalyst India A report on Indian Consumer Durables Industry The target market segments considered for aspiration and lifestyle goods are the 35 million homes representing the consuming classes and the rich. It was the roughly 80 million households that comprise the upper aspiring to lower consuming that so excited the global market when they decided to enter the Indian market in the early 1990’s. when the Indian market first began to open up post liberalization. the first thing they saw was the massive volume of this potential market. . or some 150 million people. that the MNCs started taking a closer look at the purchasing power of the country’s middle class. rather than its cultural idiosyncrasies. Inevitably. It was not until 1992.
while domestic companies compete on the basis of their well-acknowledged brands. Products like air conditioners are no longer perceived as luxury products. Government of India The biggest attraction for MNCs is the growing Indian middle class. emergence of new companies (especially MNCs) and introduction of state-of-the-art models. changing lifestyles.7 13. rural electrification programmes have always lagged behind schedule. demand for consumer durables has increased with rising income levels.Corporate Catalyst India A report on Indian Consumer Durables Industry Overview of India’s Consumer Durables Market The Indian consumer durables segment can be segregated into consumer electronics (TVs.2 18 14 12 10 8 6 4 2 0 11. an extensive distribution network and an insight in local market conditions. MNCs hold an edge over their Indian counterparts in terms of superior technology combined with a steady flow of capital. especially the rural electrification programme. double-income families. which is apparent from the fact that these companies command more than 65 per cent market share in the colour television (CTV) segment. air conditioners (A/Cs). Any incremental . microwave ovens. Most of the segments in this sector are characterized by intense competition.8 12. Growth of Consumer Electronics Production in India 20 18 16 Rs billion 16.9 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Ministry of Information and Technology. MNCs continue to dominate the Indian consumer durable segment. vacuum cleaners and dishwashers. This has not favoured durable companies till now. increasing consumer awareness and introduction of new models. availability of credit. Given the government's inclination to cut back spending. One of the critical factors those influences durable demand is the government spending on infrastructure. washing machines.8 15. price discounts and exchange schemes. VCD players and audio systems etc. This market is characterised with low penetration levels. In consonance with the global trend.) and consumer appliances (also known as white goods) like refrigerators. over the years.
With the advent of MP3 music files. Compaq and HP sell MP3 music players that plug into home-stereo systems. digital cameras. The digital revolution is shaking up the consumer durables industry. Microsoft Corp. Consumerization of technology could be a major phenomenon over the next 5 to 10 years. These new machines need to work together readily. game machines. Apple Computer is positioning its new iMac as a digital-entertainment device. and should be as easy to set up and use as a telephone or a television. consumer financing has become a major driver in the consumer durables industry. Apart from steady income gains. and home networking. Sony is building Vaio computers that focus on integrating multimedia applications. appliances with embedded devices. . it is no longer clear who controls which part of home entertainment. personal video recorders. companies need to build simpler devices that offer more entertainment and convenience. other factors that will support rising sales include a strong emphasis on retail technology. washing machines. TVs and music systems.Corporate Catalyst India A report on Indian Consumer Durables Industry spending in infrastructure and electrification programmes could spur growth of the industry. as healthy companies gain market share by buying out weaker ones at attractive prices. Growth Scenario Rising disposable income and declining prices of durables have resulted in increased volumes. This has set off a battle for dominance. and the shakeup is spanning the entire technology spectrum. communitarian and IT products) is estimated at Rs 32 billion (US $7.1 billion). The market for consumer durables (including entertainment electronics. More startups are trying to carve out profitable niches in digital music. private labels and the subletting of floor space in larger stores to smaller retailers selling a variety of products and services. video. Philips sells stereos that hook into a high-speed Internet connection to play music from the Web.electronic hardware. and a host of other media and services. is spending billions on entertainment initiatives such as its Xbox video game console. The market is expected to grow at 10 to 12 per cent annually and is expected to reach Rs 60 billion (US$13. This could hasten industry consolidation. An increase in disposable income is aided by an increase n the number of both double-income and nuclear families. software and entertainment content. Some high-growth categories within this segment include mobile phones. Among department stores. loyalty schemes. As more consumers grow comfortable with technology. colour televisions and personal computers. retailers are joining forces with banks and finance companies to market their goods more aggressively. such as refrigerators. the rural durables market is growing at 25 per cent annually. to develop a range of capabilities .3 billion) by 2008. The urban consumer durables market is growing at an annual rate of seven to 10 per cent. The industry is witnessing a number of strategic alliances. such as music and coffee. In the case of more expensive consumer goods.
000 4.048 5.000 2. 8-10 Reduction in prices of fullyautomatic machines fuelled by rising disposable income. Low base. it will cease to be the primary demand driver. Though price declines will continue.000 8.230 9. driven by the growth in CTV’s and air conditioners.029 10.026 127 1.000 0 2005 Television sets 693 4.Corporate Catalyst India A report on Indian Consumer Durables Industry Sales trend and future projection of consumer electronics segment 14. Instead the continuing strength of income demographics will support volume growth.178 128 1. increasing demand for fully-automatic segment 2007-08 over 2005-06 (CAGR) % Growth Driver 20-22 Decreasing prices and changing lifestyle.352 129 2007 2008 Refrigerators 2009 2010 Personal computers Video recorders Source: Intelligence Unit. Value growth of durables is expected to be higher than historical levels as price declines for most of the products are not expected to be very significant.000 12.655 11. fuelled by increase in disposable income.867 8. The Economist Consumer durables are expected to grow at 10-15 per cent in 2007-08.996 6.436 10.505 5.2 million units.542 121 121 894 125 1. Product Category Air-Conditioners Refrigerators 2005-06 over 2004-05 % Growth Driver 15 Reduction in prices 4-6 Increasing demand resulting in high concentration in urban areas.000 '000 units 10.0-8. Colour Televisions Washing machines 3-5 7-9 Source: CRIS INFAC .000 6.204 11. To touch 8. 5-8 Increasing disposable income and declining prices.795 4.626 789 2006 5. 5-8 High demand for the frost-free segment together with reduction in prices.
with around 18% of its employees working in Research & Development. The parent company is headquartered at Benton . The Samsung manufacturing complex housing manufacturing facilities for Colour Televisions. Tokyo. COMPETITION OVERVIEW Samsung India Samsung India commenced its operations in India in December 1995.4 29. Market share of major players in refrigerator market 13. Shanghai and Romen. Samsung design centres are located in London.4 m Sa hi W l oo lp r LG 24 23 29. 20 August. Refrigerators and Washing Machines is located at Noida. near Delhi. Samsung ‘Made in India’ products like Colour Televisions. today enjoys a sales turnover of over US$ 1 billion in just a decade of operations in the country. Colour Monitors. Samsung India currently employs over 1600 employees. Los Angeles.4 j re od G ng su 16.Corporate Catalyst India A report on Indian Consumer Durables Industry 2. Samsung India has its headquartered in New Delhi and has a network of 19 Branch Offices located all over the country. San Francisco. CIS and SAARC countries from its Noida manufacturing complex. Colour Monitors and Refrigerators are being exported to Middle East.1 0 5 10 15 20 25 30 35 Percentage Share May-05 Source: ORG-MARG Outlook Business. 2006 May-06 Whirlpool of India Whirlpool was established in 1911 as first commercial manufacturer of motorized washers to the current market position of being world's number one manufacturer and marketer of major home appliances.8 15.7 11.
the annual turnover of the company for its Indian enterprise was Rs. In the year ending in March '06.9 30.375 crores.1 W hi l oo rlp on oc de Vi ng su m Sa LG 12. The Company is one of the largest privately-held diversified industrial corporations in India. The .5 35 40 0 5 10 15 20 25 30 Percentage Share May-05 Source: ORG-MARG Outlook Business. LGE started manufacturing radios.7 14.4 13. 58. USA with a global presence in over 170 countries and manufacturing operation in 13 countries with 11 major brand names such as Whirlpool.200 Wholesale Dealers. 1913. and more than 18. LG India LG Electronics was established on October 1. Whirlpool is the most recognized brand in home appliances in India and holds a market share of over 25%. 2006. 1958 (As a private Company) and in 1959. The company owns three state-of-the-art manufacturing facilities at Faridabad. Estate. DVD players. According to IMRB surveys Whirlpool enjoys the status of the single largest refrigerator and second largest washing machine brand in India.7 13.2 18. 2006 May-06 Godrej India Godrej India was established in 1897.1. Today. under the Indian Companies Act.Corporate Catalyst India A report on Indian Consumer Durables Industry Harbor. It's global leading products include residential air conditioners. Laden and Ignis.270 million). Michigan. operating 77 subsidiaries around the world with over 72. Market Share of the Major players in Washing Machine segment 13. The combined Sales during the Fiscal Year ended March 31. amounted to about Rs.000 Retail Outlets. KitchenAid. Bauknecht. Pondicherry and Pune.5 34. the Company was incorporated with limited liability on March 3. The company has as many as 27 R & D centers and 5 design centers. Roper. 20 August.000 million (US$ 1.000 employees worldwide it is one of the major giants in the consumer durable domain worldwide. The Company has a network of 38 Company-owned Retail Stores. 1932. CDMA handsets. home theatre systems and optical storage systems. more than 2.
Nairobi (Kenya). .Corporate Catalyst India A report on Indian Consumer Durables Industry Company has Representative Offices in Sharjah (UAE). Colombo (Sri Lanka). Riyadh (Saudi Arabia) and Guangzhou (China-PRC).
Corporate Catalyst India A report on Indian Consumer Durables Industry Toshiba India Toshiba India Private Limited (TIPL) is the wholly owned subsidiary of Japanese Electronic giant Toshiba Corporation and was incorporated in India on September 2001. Toshiba had a presence in India since 1985 and was represented in India through their Liaison Office. The company was accredited with the ISO-9001 certification in the month of February. and its products are used in 133 countries. Hitachi India Hitachi India Ltd (HIL) was established in June 1998 and engaged in marketing and sells a wide range of products ranging from Power and Industrial Systems. Japan. Air Conditioning & Refrigeration Equipment to .2 17. Sharp has a production base in 26 countries with 33 plants.3 0.6 26 Market share in per cent Source: ORG_GFK. The products were sold under the Optonica brand name. VCRs. 215 Sony World and Sony Exclusive outlets and 21 direct branch locations. 2001. Market share of colour TV market LG Samsung Sony Sharp Toshiba Hitachi 1. Dec 2006 Sony India Sony Corporation. In India. the company was converted into a public limited company in the same year. Industrial Components & Equipment. The company also has presence across the country with 21 company owned and 172 authorized service centers. Japan . Sharp India Ltd Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and Electronics Pvt Ltd. The company manufactures consumer electronic goods such as TVs. The company was entered into a joint venture with Sharp Corporation. Sony has its distribution network comprising of over 7000 channel partners. established its India operations in November 1994.a leading manufacturer of consumer electronic products to manufacture VCRs/VCPs/VTDMs.5 0. VCPs and audio products.1 0 10 20 30 10. The name was changed to Kalyani Sharp India in 1986.
LCD TVs. Some of HIL’s product range includes Semiconductors and Display Components. Smart Boards and DVD Camcorders. materials and components.Corporate Catalyst India A report on Indian Consumer Durables Industry International Procurement of software. It also supports the sale of Plasma TVs. LCD Projectors. .
a new Designs Act and amendments to the Patents Act show India’s continued effort to protect IPR. in an attempt to encourage manufacture of electronics in India has changed the tariff structure significantly. The country has already made several changes in its IP acts over the years. growth and development. floppy disc drives and CD ROM drives continue to be exempt from excise duty. Customs duty on Information Technology Agreement (ITA-1) items (217 items) has been abolished from March 2005. Several amendments to the Copyright Act. and an expedited import-export process. 3. no duties on imported components or capital equipment. All goods required in the manufacture of ITA-1 items are exempt from customs duty. The Government of India has developed a robust IP act to facilitate innovation. creation of a new Trademark Act. hard disc drives. . It is now possible to import duty-free all components and raw materials. a new Designs Act and amendments to the Patents Act show India’s desire to change and adapt. EHTP benefits include export credits. The government. Customs duty on specified capital goods used for manufacture of electronic goods has been abolished. The Indian Copyright Act 1957 was amended in 1999.Corporate Catalyst India A report on Indian Consumer Durables Industry 3. amended most of its IPR Acts and Rules to conform to the said Agreement.1 Intellectual Property Rights Protection of Intellectual property rights (IPR) is a prime requisite for development of R&D and innovation in the consumer electronics sector. creation of a new Trademark Act. Customs duty on specified raw materials / inputs used for manufacture of electronic components or optical fibres / cables has been removed. business tax incentives. Microprocessors. The Industrial Design Act 1911 was effectively replaced by The Design Act 2000. Excise duty on computers has been removed. the patent Act 1970 was amended in 1999 & 2003 and Trademarks and Merchandise Marks Act 1959 was overtaken by a new Trademark Act 1999. manufacture products and export it. and the Layout Design of Semiconductor integrated Circuit Act 2000 was enacted. EHTP (Electronic Hardware Technology Park) is an initiative to provide benefits to companies that are replacing certain imports with local manufacturing. In the current WTO regime. India is a party to the “Trade Related Aspects of the Intellectual Properties (TRIPs) Agreement” and has accordingly. Several amendments to the Copyright Act. New acts have also been enacted to cover semiconductors and layout designs which will be of considerable importance to the electronic industry.. POLICY AND INITIATIVES Foreign investment up to 100 per cent is possible in the Indian consumer electronics industry to set up units exclusively for exports.
office equipment etc. The consumer electronics and durables sector is expected to continue to benefit from supportive policies and become globally competitive. raw materials and components. IT/electronics was the first sector in India to face complete customs tariff elimination.1 Free Trade Agreement WTO regime which came in force in 2005. The ITA-1 would result in intensifying competition as more imported products will be easily available at lower prices. becomes difficult. In fact.94 per cent of the total foreign direct investment (FDI) approved.32 billion. geographical indications. the import of capital goods. During the same period the FDI inflow for electrical equipment (including computer software and electronics) was US$ 3. Deemed export benefits are available to suppliers of these goods from the Domestic Tariff Area (DTA). unauthorised use of the patented innovations. 3. The FDI approval for electrical equipment (including computer software and electronics) from January 1991 to March 2004 was US$ 7. trade marks. Out of these 217 items. 3. A part of the production from such units is permitted to be sold in the DTA depending upon the level of the value addition achieved.29 billion.2. etc. results in zero customs duty on imports of all telecom equipment. the member nations are asked to modify their existing laws. . and the protection of industrial designs. Accordingly. trade marks. free of duty.2. several items were already at NIL customs duty. components and raw materials or the engagement of foreign technicians for short duration does not require any additional approvals. copy rights and related rights.2 Regulations 3. layout designs of integrated circuits and undisclosed information. Once these laws come into force.Corporate Catalyst India A report on Indian Consumer Durables Industry The agreement on TRIPs takes care of the intellectual property rights by enforcing the patent rights.2 Foreign Investment Policy: FDI Foreign investment up to 100 per cent is allowed in Indian electronics industry set up exclusively for exports. 217 IT/electronic items were covered under the Information Technology Agreement (ITA) of the WTO for complete customs tariff elimination by 2005. spares and consumables. 3. their entire requirements of capital goods. which was 9. Enforcement of the TRIPs agreement makes the production of any product possible either through internal innovation or through formal transfer of technologies.3 Procedure for approval Once the investment in equity has been approved.2. The units set up under these programmes are bonded factories ligible to import.
Foreign technology induction is encouraged through FDI and foreign technology collaboration agreements.2. Approval for setting up units in Export Processing Zones (EPZs) is given by the Board of Approvals in the Ministry of Commerce. Approval for setting up export-oriented units (EOUs) outside the zones is given by the Ministry of Industry. Approvals for setting up Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP) units are cleared by the Inter Ministerial Standing Committee (IMSC) set-up under the Chairmanship of the Secretary. Department of Information Technology. to complement and supplement domestic investment.Corporate Catalyst India A report on Indian Consumer Durables Industry Approval of Ministry of Home Affairs is not needed for hiring foreign nationals holding valid employment visa.4 FDI/ Foreign Technology Collaboration Agreement The government facilitates FDI and investment from Non. 3. FDI and foreign technology collaborations are approved through automatic route by the Reserve Bank of India .Resident Indians (NRIs) including Overseas Corporate Bodies (OCBs). Proposals involving foreign direct investment not covered under the automatic route are considered by the Foreign Investment Promotion Board (FIPB). predominantly owned by them.
have a direct presence only in 15. at least a large proportion of its constituents.000 retail outlets (for consumer durables) in the country. manpower.Corporate Catalyst India A report on Indian Consumer Durables Industry 4 4. About 65 per cent of Indian population that lives in its villages still remains relevant for some consumer durables companies. Regular power supply is imperative for any consumer electronics product. improving lifestyles. rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of white goods industry segment. Companies not only have to set up the basic infrastructure in terms of office space. low running cost. rural consumers should be provided with easily payable consumer finance schemes and basic services. Also. and rise in temperatures.000 of the around 40.2 And the opportunities… The rising rate of growth of GDP. leading to increased expenses due to transportation. But that remains a major hiccup in India. Currently. believed to be months `good for buying’. still buys black and white TVs and doesn't know what flat screens are. which are touted as having the largest distribution network in the country. foraying into these rural markets has a considerable cost component attached to it. Purchase necessarily done only during the harvest.1 The Challenges OPPORTUNITIES AND CHALLENGES Heavy taxation in the country is one of the challenges for the players. whereas the corresponding tariffs in other Asian countries are between 7 and 17 per cent. . This India. Poor infrastructure is another reason that seems to have held back the industry. power availability. festive and wedding seasons — April to June and October to November in North India and October to February in the South. 4. Penetration of consumer durables would be deeper in rural India if banks and financial institutions come out with liberal incentive schemes for the white goods industry segment. but also spend on transportation for moving inventory. after sales services to suit the infrastructure and the existing amenities like electricity. At its present structure the total tax incidence in India even now stands at around 25-30 per cent. While the consumer durables market is facing a slowdown due to saturation in the urban market. rural consumers purchase their durables from the nearest towns. growth in disposable income. Even LG and Samsung. should be converted to routine regular feature from the seasonal character.000 to 18. voltage etc.
a flood of imports is unlikely and would be rather need based.5% for washing machines. The ability of imports to compete is set to rise. Washing machines and refrigerators will also benefit from lower input costs. the rural market is growing faster than the urban India now. The attractive schemes of financial institutions and commercial banks are increasingly becoming suitable for the consumer. local manufacturing will continue to stay competitive. there will be some positive benefits in the form of reduction in input costs. The urban consumer durable market for products including TV is growing annually by 7 to 10 % whereas the rural market is zooming ahead at around 25 % annually. The other factor for surging demand for consumer goods is the phenomenal growth of media in India. This has a direct bearing on future demand. has a 2% penetration in case of refrigerators and 0.Corporate Catalyst India A report on Indian Consumer Durables Industry Rural India that accounts for nearly 70% of the total number of households. The Internet being now used by the market functionaries that will lead to intelligence sales of the products. Otherwise. The increasing popularity of easily available consumer loans and the expansion of hire purchase schemes will give a moral boost to the price-sensitive consumers. Consumer goods companies are themselves coming out with attractive financing schemes to consumers through their extensive dealer network. the effective duty protection is still quite high at about 35-40 per cent. The urban market is a replacement and up gradation market now. Reduction in import duties may significantly lower prices of products such as microwave ovens. The vigorous marketing efforts being made by the domestic majors will help the industry. It will help to sustain the demand boom witnessed recently in this sector. At the same time. . whose market size is quite small in India. The flurry of television channels and the rising penetration of cinemas will continue to spread awareness of products in the remotest of markets. So. offers plenty of scope and opportunities for the white goods industry. However. According to survey made by industry.